College students like to loan out their cars to their friends, probably because many of them don't own cars. Unfortunately, this isn't good practice because it jeopardizes your car-insurance coverage. Here are four disadvantages of loaning your car to friends.
Your Insurance Pays When Your Friend Damages Your Car
Since car insurance follows the car and not the driver, it's your insurance coverage that will pay for any damages your friend may cause to your car. You may be a careful driver who always takes Uber when drunk, but your friends may not always be as careful as you. If they drive into a wall after a night out, you will have to file a claim with your insurer even if your friend also has car insurance.
Both of Your Insurers Pay When Your Friend Causes an Accident
If your friend should cause an accident, then both you and they may have to pay for the ensuing damages. If the damages don't exceed your coverage, then you are the only one on the hook for paying. If the damages do exceed your coverage, then you pay as far as your limit goes, and your friend's coverage picks up the rest of the tab.
You Can Be Sued If Your Friend Doesn't Have Coverage
In the unfortunate event that your friend doesn't have coverage, and they cause an accident, you will be held solely responsible for the damages. This means that your coverage limit won't help you; the accident victims will demand compensation irrespective of the limit. In fact, they can sue you and come after your personal assets, even going as far as waiting to garnish your wages when you graduate from college and start working.
All the Above Cases May Result in a Rate Hike
As you can see from the above discussions, if your friend damages your car, damages other people's cars, or injures other people, your insurance coverage is likely to pay for the damages. The more you incur such incidences and file the relevant claims, the more you will look like a risky driver in your insurer's eyes. Couple this with the claims you may present due to your own driving, and you may see a rate hike after some time.
Hopefully, your friends won't cause any accidents or engage in incidents that may affect your coverage. There are measures you can take to lower your rates if they have hiked due to you or your friend's driving incidences. For example, you can maintain good grades to enjoy student discounts, bundle your coverage with your parent's coverage, or take a defensive-driving class.
Talk to a company such as Mid-Alliance Insurance Associates LLC to learn more.